DENVER--(BUSINESS WIRE)--Jul. 26, 2012-- CoreSite Realty Corporation (NYSE: COR), a national provider of powerful, network-rich data centers, today announced financial results for the second quarter ended June 30, 2012.
Tom Ray, CoreSite’s Chief Executive Officer, commented, “During the second quarter, we achieved solid financial results driven by strong revenue growth. We also welcomed the arrival of Jarrett Appleby as Chief Operating Officer. As an initial priority, Jarrett is accelerating our drive to reshape our go-to-market platform and sales engine to align with our targeted customer verticals. We already are seeing results from our transition to vertical alignment, with strong bookings in our Network, Cloud and System Integrator verticals. However, as anticipated, new-and-expansion bookings in Q2 were lighter than our record set in Q1 and correlate to 78% of the average stabilized rent in bookings over the prior 4 quarters. This was driven primarily by a lack of salable inventory in Chicago and lower volume in bookings larger than 3,500 square feet. We ascribe lower Q2 volume in bookings greater than 3,500 square feet to normal fluctuations in this market segment. We have a solid sales funnel in this segment and believe we are on track to execute upon our revenue objectives for the year.”
Mr. Ray concluded, “As we move into the second half of 2012, we are seeing positive results from our recent investments in our go-to-market platform. Related to that, we continue to invest in and reshape our company to orient around our targeted customers. We are highly energized by the accelerating momentum we are seeing with our customers and in our markets. We remain focused on executing our financial and operational goals for 2012 and driving increasing returns on invested capital in 2013 and beyond.”
CoreSite reported FFO of $17.3 million for the three months ended June 30, 2012, an increase of 5.7% on a sequential quarter basis and a 25.2% increase over the same quarter of the prior year. On a per diluted share and unit basis, FFO was $0.37 for the three months ended June 30, 2012, as compared to $0.30 per diluted share and unit for the three months ended June 30, 2011. Total operating revenue for the three months ended June 30, 2012, was $50.6 million, a 7.1% increase on a sequential-quarter basis and a 19.2% increase over the same quarter of the prior year. The company reported net income for the three months ended June 30, 2012, of $1.8 million and net income attributable to common shares of $826,000, or $0.04 per diluted share.
CoreSite executed new and expansion data center leases representing $4.6 million of annualized GAAP rent during the quarter, comprised of 26,290 NRSF at a weighted average GAAP rate of $177 per NRSF and a weighted average lease term of 2.8 years, reflecting the lower proportion of bookings exceeding 3,500 square feet.
During the second quarter, data center lease commencements totaled 16,998 NRSF at a weighted average GAAP rental rate of $195 per NRSF, which represents $3.3 million of annualized GAAP rent.
Renewal leases totaling 64,048 NRSF commenced in the second quarter at a weighted average GAAP rate of $99 per NRSF, reflecting a 1.0% increase in rent on a cash basis and a 9.2% increase on a GAAP basis. Included in total renewals is the renewal of a 27,918 NRSF powered shell lease at CoreSite’s 55 South Market Street building in San Jose. Excluding this transaction, the weighted-average GAAP rate on renewals was $147 per NRSF, reflecting a 4.3% increase in rent on a cash basis and a 9.6% increase on a GAAP basis. The company’s rent-retention ratio for the second quarter was 69.6%.
Development and Redevelopment Activity
During the second quarter, CoreSite completed construction on 78,856 NRSF of space in Northern Virginia, Chicago and the San Francisco Bay Area for a total cost of $39.6 million, or approximately $502 per NRSF. The delivery of this new capacity represents a 7.1% increase in operating data center NRSF over the prior quarter, driving a correlating decline in the Company’s occupancy ratio.
At June 30, 2012, the company had 70,841 NRSF of data center space under construction. This total is comprised of 50,600 NRSF in Santa Clara, representing the final phase of construction at CoreSite’s building at 2972 Stender Way, and 20,241 NRSF in Chicago, which will add to the 29,261 NRSF the company delivered in Chicago at the end of the second quarter. Of the estimated $50.2 million required to complete the current Santa Clara and Chicago projects, the company had incurred costs of $23.9 million through June 30, 2012.
Including the space currently under construction or in preconstruction at June 30, 2012, as well as currently operating space targeted for future redevelopment, CoreSite owns land and buildings sufficient to develop or redevelop 810,036 square feet of data center space, comprised of (1) 70,841 NRSF of data center space currently under construction, (2) 393,945 NRSF of office and industrial space currently available for redevelopment, and (3) 345,250 NRSF of new data center space available for development on land that CoreSite currently owns at its Coronado-Stender business park.
Balance Sheet and Liquidity
As of June 30, 2012, CoreSite had $146.4 million of total long-term debt equal to 10.9% of total enterprise value and equal to 1.7x annualized adjusted EBITDA for the quarter ended June 30, 2012. The company has no debt maturities until 2014, assuming all extensions are available and exercised.
At quarter end, the company had $5.5 million of cash available on its balance sheet and $139.1 million of available capacity under its revolving credit facility.
On June 15, 2012, CoreSite’s board of directors declared a dividend of $0.18 per share of common stock and common stock equivalents for the second quarter of 2012. The dividend was paid on July 16, 2012 to shareholders of record on June 29, 2012.
The company is updating its 2012 guidance of FFO per diluted share and unit to a range of $1.42 to $1.52 from its prior range of $1.38 to $1.52. This outlook is predicated on current economic conditions, internal assumptions about its customer base, and the supply and demand dynamics of the markets in which it operates. Further, the company’s guidance does not include the impact of any additional acquisitions or capital markets transactions that may become available.
Upcoming Conferences and Events
CoreSite will participate in Bank of America’s 2012 Global Real Estate Conference from September 12 through September 13 in New York, NY.
Conference Call Details
The company will host a conference call July 26th at 12:00 p.m. (Eastern Time) to discuss its financial results, current business trends and market conditions.
The call can be accessed live over the phone by dialing 877-407-3982 for domestic callers and 201-493-6780 for international callers. A replay will be available shortly after the call and can be accessed by dialing 877-870-5176 for domestic callers, or for international callers, 858-384-5517. The passcode for the replay is 397061. The replay will be available until August 3, 2012.
Interested parties may also listen to a simultaneous webcast of the conference call by logging on to the company’s website at www.CoreSite.com and clicking on the “Investors” tab. The on-line replay will be available for a limited time beginning immediately following the call.
CoreSite Realty Corporation (NYSE: COR) is a national provider of data center products and interconnection services. More than 750 customers, such as Global 1000 enterprises, communications providers, cloud and content companies, financial firms, media and entertainment, healthcare, and government agencies choose CoreSite for the confidence that comes with customer-focused data center products, service and support systems, and scalability. CoreSite’s network centric computing platform is a business catalyst, featuring the Any2 Internet exchange and network ecosystems, which include access to 225+ carriers and service providers and a growing mesh of more than 15,000 interconnections. The company features a diverse colocation offering from individual cabinets to custom cages and private suites, with 14 data center locations in nine major U.S. markets. For more information, visit www.CoreSite.com.
Forward Looking Statements
This earnings release and accompanying supplemental information may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the company’s control, that may cause actual results to differ significantly from those expressed in any forward-looking statement. These risks include, without limitation: the geographic concentration of the company’s data centers in certain markets and any adverse developments in local economic conditions or the demand for data center space in these markets; fluctuations in interest rates and increased operating costs; difficulties in identifying properties to acquire and completing acquisitions; significant industry competition; the company’s failure to obtain necessary outside financing; the company’s failure to qualify or maintain our status as a REIT; financial market fluctuations; changes in real estate and zoning laws and increases in real property tax rates; and other factors affecting the real estate industry generally. All forward-looking statements reflect the company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Furthermore, the company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the company’s most recent annual report on Form 10-K, and other risks described in documents subsequently filed by the company from time to time with the Securities and Exchange Commission.